Welcome to Rug News



  • Oriental Weavers
  • Nourison Banner
Dynamic Rugs
  • Printer Friendly Version
  • Decrease Text SizeIncrease Text Size
  • PDF
Business, Trends

State of the Industry: Rug Execs Lay Out Expectations for 2023, Recap 2022 -- Part 2

Part 2 continues RugNews.com's state of the industry special report and discusses what area rug executives anticipate for the beginning of the new year and how business fared in 2022.

Lisa Vincenti
1/12/2023
montage of 2022 rugs and showrooms
Clockwise, from top right, Nourison's Custom Reserve Studio hand-knot samples; S&H Rugs' hand-knotted
Mamluk, sh65540; Karastan showroom vignette of Stacy Garcia rugs; Oriental Weavers'
sprawling new NYC showroom; and a LUXE by Kaleen's custom Sikri collection rug.

SPECIAL REPORT – Part 2 continues RugNews.com's state of the industry special report and discusses what area rug executives anticipate for the beginning of the new year -- and how business fared in 2022.

For many vendors, the pandemic brought with it a renewed attention on the home, including the high-end of the market, with many area rug players introducing new high-end assortments, customization options and collections geared toward the designer segment during the past year and a half. In fact, it is this slice of the market that many area rug executives predict will continue to be a bright spot heading into 2023.

RugNews.com surveyed key rug executives from a range of companies -- from machine-made domestic manufacturers to hand-knot specialists -- to track performance across the board in 2022 and look ahead to 2023. Don't miss of our State of the Industry Special Report -- Part 1.

KALEEN

Kaleen has been a source for mid-tier area rugs and has become known for its high-quality hand-tufted assortment. The company’s hand-tufted Chancellor has been its most popular collection for past three years, and sales of the Marble collection, also hand-tufted, have been good as well. But the largest gains have been in the company’s broadloom division, which rolled out a custom-rug merchandising display system for area rug retailers.

“Our sales have been steady, but 2023 is going to be a reset year and I expect to see a slow down,” Monty Rathi, Kaleen, COO, said. “We have already begun to see that – area rugs sales have been slower, but our broadloom is keeping us busy and the high-end remains strong.”

"Retailers don't want to be in the low-end business and that is why we created our custom broadloom business and our new merchandising system [for rug retailers]. We are tapping broadloom customers and also retail customers." -- Monty Rathi, COO, Kaleen

Rathi said that some of the company’s rug retailers are sitting on high levels of inventory and that is impacting their purchasing decisions. However, Kaleen has controlled its inventory and fine-tuned product development over the past year. “Inventory is taking time to turnover and the market is asking area rug vendors for lower prices as a result. So we have been focusing more on broadloom.

“The model [for area rugs] has changed in that buyers are going either with the high- or low-end -- customers are looking for value, and it doesn't matter if it is a machine-made or hand-made rug. They are looking for value," he added

In addition, as other executives have noted, the e-commerce segment was “tough” in 2022. “I expect it to slow down even more because it has been so strong -- and that is driving customers back to stores." Rathi explained that the escalating cost of freight has had a major impact on e-commerce sales for low- to mid-end rugs in larger sizes. “The market for larger rugs is shifting back to brick-and-mortar stores. It is expensive to ship a large $200 rug, so we gained more exposure at brick-and-mortar.

“Our rug retailers are smarter and are moving away from low-end product. They don't want to be in the low-end business and that is why we created our custom broadloom business and new merchandising system. Rug retailers can offer any custom sizes with delivery in four to six weeks. We are tapping broadloom customers and also retail customers, who can have 800 SKUs with our three rack display system and who see higher profit from custom rugs.”

Rathi also expects the company’s licensed program with HGTV celebrity Tamara Day of Bargain Mansions to take off next year, as it is now fully in stock and expected to hit store shelves in the first quarter of 2023. “I have no doubt that the program will do well next year. Even though retailers don't want to commit to anything because of economic factors, we received a good response. So I expect it to be a good performer next year.”

LOLOI

“2022 was another record year at Loloi,” Austin Craley, vice-president of sales, Loloi, reports. “Despite supply chain issues, increasing raw material costs, political and economic uncertainties and numerous other issues, Loloi and our customers stayed focused on the best ways to grow our businesses together, and it worked!”

At the Dallas-based rug vendor, color, value and fashion drove its rug business. “Customers are looking for freshness to convince consumers to buy from them, and Loloi makes sure they get it -- we offer fresh products colored-well and priced-right, and customers will buy them.

“There is still money out there waiting to be spent, and consumers will spend it with those who give them reasons to do so.” -- Austin Craley, vice-president of sales, Loloi

“When you consistently introduce fresh products that are colored and priced right, it opens up opportunities in all channels, constructions and price-points. Our goal is to be meaningful to all of our customers, by offering them unique products they can't find elsewhere, and that they can be profitable with."

Craley, who says Loloi will have several major showroom expansions in 2023, expects 2023 to have a “rough start” due to the economic uncertainties, but customers and suppliers that stay focused on their strengths and business will find success. “There is still money out there waiting to be spent, and consumers will spend it with those who give them reasons to do so.”

NATCO HOME

“We are single digits ahead of [2021], which we are happy about,” reported Mark Ferullo, executive vice president. “We started 2022 cautious about the increased business [from 2021] because we did not feel we (and the industry) could sustain such increases.”

Natco's value collections drove and continue to drive business. “We continue to manufacture a great price to quality ratio product,” Ferullo added. “Our retailers can make margin as they provide updated colors, trend right designs and a nice rug to their consumers.”

Natco Home faced the same major hurdles as the rest of the area rug industry with the uncertain costs associated with the imported rugs, freight delays as well as cost fluctuation, raw material costs and customer demand.

“2023 will be about value and retail price points. Consumers are more conscious about what they are getting for their dollar and we must continue to provide a trend right value for their dollar.” -- Mark Ferullo, executive vice president, Natco

“Our strategy is to still maintain a healthy inventory level as we work closely with our retail partners to be in stock and not overstocked, which has proven very challenging after the Covid years,” he said. “2023 will be about value and retail price points. Consumers are more conscious about what they are getting for their dollar and we must continue to provide a trend right value for their dollar.”

Natco is forecasting an increase in the first half of 2023, although it will be a moderate gain. We are a consuming society, and providing the best value will be critical. Our Maine manufacturing facility is still running seven days a week, so we are cautiously optimistic as a domestic manufacturer,” Ferullo noted, adding that the company expects to add one more loom in 2023 to craft new qualities.

“Many retailers have asked for a short weaving time so they can keep inventory down and provide a just-in-time delivery to their customers so they do not have to carry a high level of inventory. Fortunately, we can provide that domestically which is an advantage we have as a supplier.”

NOURISON

Nourison, which rolled out its new Custom Reserve Program and revamped its Las Vegas and High Point showrooms' merchandising to feature its customizable options, reports that sales overall were steady. “We had a good year,” said Andrew Peykar, president. “We were up in some areas and down in others. Our new products performed well, and we were able to gain market share.”

Top drivers of sales in 2022 at Nourison proved to be the company’s low-priced rugs, as well as its high-end rugs, custom-size rugs and custom projects.

"Pre-Covid, our mid-price category was not trending as well as low and higher price points. The pandemic fueled the growth for our e-commerce channel and lower price points,” Peykar continued. “Post pandemic, consumers began reacting to higher price points and better quality, driving an increase across all categories.”

“We had a good year ... We expect to see continued growth for both wall-to-wall carpet and custom-sized rugs."
-- Andrew Peykar, president, Nourison

In 2023, Peykar said Nourison is expecting its low-end rugs in the e-commerce channel to continue to drive growth. While, high-end rugs, including hand-knotted styles will do well with dealers. “We expect continued demand for custom-size rugs and performance rugs. We also expect to see continued growth for wall-to-wall carpet and custom-sized rugs."

ORIENTAL WEAVERS

“Twenty twenty-one was a record year for our company and our industry,” said Jonathan Witt, president, Oriental Weavers US. “2022 started well for everyone, but we knew going in that comping the record numbers of 2021 would be a challenge. However, none of us expected the convergence of the war in Ukraine, dramatic inflation, etc. Just as the supply chain had improved to allow retailers and suppliers to bring inventory levels back to sufficient levels, demand dropped tremendously and left everyone with more inventory than needed.”

So while 2022 began strong for OW, the company was not immune to the unexpected – and rapid – shift in costs resulting in flagging consumer confidence. “We experienced more stability at the mid and upper price points and with the retailers whose overall assortment in other product categories focuses on those target markets. Obviously, the dramatic cost increases of fuel, food and utilities had a more significant effect on consumers at lower income levels and those are the same customers shopping for more entry-price point rugs, so that market was more volatile throughout the year,” he continued.

“During our recent conversations with retail partners, most believe that things should normalize and return to a more normal demand cycle in late Q2.” -- Jonathan Witt, president, Oriental Weavers US

Other challenges faced by the rug industry and also impacting OW last year include, the high cost of ocean freight and drayage out of Europe and the Middle East, which remain “exponentially higher” than pre-pandemic levels, and the increased costs of domestic labor and the challenges in terms of recruitment and retention.

“It appears the first quarter will continue to be a tough environment for our industry, but spring is always the strongest season for our company due to our extensive offering of outdoor rugs, so we are more bullish about Q2.

“During our recent conversations with retail partners, most believe that things should normalize and return to a more normal demand cycle in late Q2,” Witt said.

S&H RUGS

Hand-knot area rug specialist S&H Rugs also noted that topping 2021 revenues would have been a monumental challenge. “2022 has not been as strong in sales as 2021 with about 25 percent difference in gross sales,” Ori Wilbush, founder, said. “It's not that 2022 has been so bad or abnormal, as much as that 2021 had just been the best year ever in hand-made rugs -- it was unprecedented."

2021 was a stellar year at S&H Rugs and Wilbush attributed that to consumers’ pent up demand and their desire to cover hard floors in new homes. “2022 was a different story with more tepid sales volumes impacted by rising interest rates compounded by economic uncertainties and global instabilities. I expect the same for 2023, especially in the first half.”

Like many in the industry, S&H’s custom and special orders are gradually gaining more market share. And the styles sought out by rug buyers are shifting away from modern and contemporary pieces with stronger sales and demand for transitional and geometric pattern pieces.

“The growth is with natural, organic and sustainable environmentally friendly fibers such as wool, cotton and silk, yet in lower-knot counts, which are more affordable and completed faster.” -- Ori Wilbush, founder, S&H Rugs

“We plan to continue to develop, source and offer interesting, different and special textures, colors and designs,” Wilbush said. “The growth is with natural, organic and sustainable, environmentally friendly fibers such as wool, cotton and silk, yet in lower-knot counts, which are more affordable and completed faster.”

Wilbush said that “brushing up on sales techniques, offering deals and opportunities, and reaching out to clients rather than sitting and waiting for things to happen will be the key to success and growth” in 2023.

RUG & KILIM

Rug & Kilim, which recently moved to a larger location in the New York City area, has been expanding its reach from a designer-focused hand-knot specialist to a wholesaler. But the company continues to focus on the needs of its designer clients. “We have had steady growth in last two years and are foreseeing the same moving forward,” said Josh Nazmiyal, founder.

“We only started with Scandinavian collection a few years ago, and now we have Burano and it is finding popularity.” And while Scandinavian collection includes rugs, available in myriad constructions, designed to appeal to a broader audience; Burano rugs, which offers classic European and Oriental motifs, offer a luxurious hand-knotted quality crafted of blend of soft Ghazni wool with Rug & Kilim’s proprietary blend of additional yarns.

In addition, the company’s Homage lineup, which reworks classic motifs in a distressed finish, “has been extremely successful,” Nazmiyal said, adding that he expects a similar result for the new Chinese and French Deco collections.

“Our energy is going to be spent more on the higher end in 2023 and our custom capabilities, which were our greatest growth is in the retail channel." --Josh Nazmiyal, founder, Rug & Kilim

Finally, Rug & Kilim’s Texture of Color collection, which offers no-pattern, textural pieces hand-knotted or hand-loomed of varying yarns, finishings and pile heights, “has been extremely well received to point that we are expanding the line in a big way to more hand-loomed and that will be a big part of our offering.

“A major part of our business is custom. We are learning that most of our business is in our core relationships with our 50 best accounts and a lot of it is custom,” Nazmyal said, adding that in 2023 he will be more focused on working with those key clients and keeping in touch with them.

“Our energy is going to be spent more on the higher end in 2023 and our custom capabilities, which is where our greatest growth is in the retail channel. We are also excited with the possibility of private label and the opportunities we have there.”

-- Don't miss of our State of the Industry Special Report -- Part 1.
Back

Related Stories

Safavieh HRI Tower